The Low-Down: Restaurants Are Cutting Deliveries As More Profitable In-Dining Returns

With ingredient costs rising and help hard to find, restaurant owners - including big chains - are choosing to cut back on deliveries as more profitable in-restaurant dining begins to return. JL

Heather Haddon and Preetika Rana report in the Wall Street Journal:

Restaurant operators said they are shutting off delivery and online sales for periods to focus on dine-in customers, who generally provide the most profitable sales. Applebees, Olive Garden and Cheesecake Factory are among those throttling delivery and online orders when their kitchens become too busy serving dine-in customers, or when locations are struggling with staffing. Operators are concluding they can’t do it all, all the time. “People who come in, that make the effort to pick up or are dining in, get priority over the ones who sit at home drinking a glass of wine and having a discussion."
Consumers might no longer be able to count on delivery of pancakes, ice cream or whatever else they crave, whenever they crave it.
Some restaurants, struggling with labor shortages and the return of customers to on-site dining, are choosing to scale back at times on often less-profitable delivery and to-go orders, companies and restaurateurs said.
The move comes as restaurants try to juggle orders from dining-rooms, phone calls, websites and apps—sometimes all hitting stretched servers and kitchens during peak hours.
Some restaurant operators said they are shutting off delivery and online sales for periods to focus on dine-in customers, who generally provide the most profitable sales. Executives of Darden Restaurants Inc., DRI 4.65% Cheesecake Factory Inc., CAKE 6.11% Dine Brands Global Inc. and First Watch Restaurant Group Inc. FWRG 2.63% are among those throttling delivery and online orders when their kitchens become too busy serving dine-in customers, or when locations are struggling with staffing.
“In that trade-off, we are always going to make sure that we’re serving the guests that are physically in front of us, because that experience has got to be right,” said John Peyton, Dine Brands chief executive. The company said restaurants in its Applebee’s chain have at times shut off delivery options in evenings, and at IHOP on weekend mornings.
Olive Garden-owner Darden Restaurants is curtailing business on weekends, when its brands can only take around four to-go orders every 15 minutes, Chief Executive Gene Lee told investors this fall. “There are a lot more orders than that,” Mr. Lee said. “We know we have excess demand.”
Customers are starting to notice the delivery outages. Fifteen percent of diners said delivery wasn’t available from full-service restaurants at peak times in recent months, according to a poll of 1,008 Americans earlier this month by Lisa W. Miller & Associates LLC, a consumer-research firm.
Food delivery boomed last year as pandemic-related restrictions resulted in restaurants closing their dining rooms, and many customers declined to eat inside even when they could out of health concerns. Many restaurants that never offered delivery began signing up for the service, and apps rang in new business.
Restaurants largely reopened their dining rooms this year, and customers began returning. But many diners still aren’t comfortable eating out, and more than a third of diners are opting for takeout and food delivery again, a separate poll of 1,003 adults by Lisa W. Miller & Associates found in October.
Olive Garden is among restaurant chains that have at times turned off to-go options.
PHOTO: CHET STRANGE/BLOOMBERG NEWS
Overall, delivery and carryout business is holding up for restaurants, even as consumers return to dining rooms. Nearly 44% of orders at sit-down restaurants were made to-go in the year ended in September, up from 20% in the same period before the pandemic, according to market-research firm NPD Group Inc.
DoorDash Inc. DASH 2.78% and Uber Eats reported growing sales in the three months ended Sept. 30, compared with the same period in 2020, despite restaurants largely having reopened their dining rooms from pandemic lockdowns. Sit-down chains including Texas Roadhouse Inc. and Brinker International Inc. are reporting higher sales this year than before the pandemic, in part because to-go sales haven’t dropped.
For restaurants, growing costs of ingredients and wages are weighing on profits, and labor remains scarce. Many restaurants have hung on to delivery and takeout as options, with the Delta variant of the virus depressing dining visits again and some operators contending with restrictions, such as the return of mask mandates and requirements for proof of Covid-19 vaccinations from diners.
But some operators said they are concluding they can’t do it all, all the time.
Brooklyn-based Bagel Point now rejects 300 to 400 online orders from apps on most weekend days because of the volume of to-go and in-person business, and encourages people to order from them directly, owner Sam Kaplan said. Michael Ayoub, founder of Brooklyn-based pizza company Fornino, said he shuts down most delivery-app orders when his restaurants get too busy with those eating inside, or when many online orders come through Fornino’s own website.
“People who come in, that make the effort to pick up or are dining in, get priority over the ones who sit at home drinking a glass of wine and having a discussion,he said about delivery.
Some delivery customers said they have been dismayed to learn they can’t always get the food they want shuttled to their homes.
Diya Sikka, a 30-year-old consultant from Manhattan, said she tried to order raspberry-lychee sorbet from her favorite Lower East Side ice-cream parlor after a stressful day at work recently, only to find it wasn’t available for delivery from DoorDash that day.
“I was like, no. Don’t do this to me today!” she said. Ms. Sikka said she was able to order the sorbet a few days later.
Other customers said less-reliable delivery experiences are making them less likely to choose that option, particularly when they can dine out again.
Alexis Jaworowski, a 25-year-old Realtor from O’Fallon, Mo., said that when she called one neighborhood restaurant for takeout recently, she was told to try back in 40 minutes because they were too busy, something she hasn’t experienced before with that restaurant. “I have definitely learned to go eat, or order food before you are super hungry,” she said.
Food-delivery companies said they are finding ways to help restaurants cope with order surges.

DoorDash earlier this year added a feature that automatically turns off delivery when a restaurant reaches its in-store dining limit, allowing operators to mark themselves as “busy” on the app, a spokesman said. The company is sponsoring a webinar next month to help restaurants manage the competing demands. “Operators are struggling to prioritize the new digital customers they gained during the pandemic with the in-restaurant customers coming back,” the enrollment message said.
Grubhub, which typically relies on restaurants shuttling orders received on its app, this month began providing its drivers when those restaurants’ own couriers couldn’t fill orders. Spokeswomen for Uber Technologies Inc.’s UBER 5.80% Eats division and Grubhub, now owned by Just Eat Takeaway.com NV, said that restaurants can readily pause delivery when they are feeling constrained.

DoorDash, Uber Eats and Grubhub representatives said that restaurants’ choosing to pause deliveries has had a limited impact on their sales.
Some restaurant-sales systems see an opportunity in helping operators navigate orders across dining rooms, delivery and takeout. Tock Inc., a reservation-booking system for diners, lets customers pick from dine-in, pickup and delivery options to help restaurants manage their flow of business, founder Nick Kokonas said.
Online ordering platform Olo Inc. recently added a feature to constrain delivery orders at peak time and lets restaurants give priority to direct sales from the restaurant rather than those from apps, Chief Executive Noah Glass said.
While some restaurant chains are investing in permanent pickup windows and dedicated to-go areas for their kitchens to handle more delivery orders, other owners said they are betting on a return to business as usual.
Matt Sussman, owner of Chicago-based restaurant Table, Donkey and Stick, got through dining-room shutdowns last year by creating a pizza menu for to-go sales. Now, with his dining room reopened and his kitchen only able to fit a maximum of six workers, Mr. Sussman said he turns off delivery at times. He also scrapped the to-go pizza, despite customer complaints, he said.
“They say, ‘Bring it back, we loved it,’” Mr. Sussman said. “If we are full, and selling a lot of food in the restaurant, we don’t have extra capacity.”